NEW YORK/LONDON: Sugar and coffee futures crumbled Wednesday and cocoa hit a fresh three-year low as investors dumped many commodities after doubts were reignited that Europe can forge a deal to end its prolonged debt crisis.
Pessimistic comments from EU paymaster Germany and new figures exposing growing stress among Europe's banks took the shine off financial market hopes of a turning point in the euro zone debt crisis at a summit this week.
Stocks and the euro tumbled on Wednesday as the air was let out of earlier ballooning hopes an EU summit this week could finally craft a comprehensive deal to end the bloc's debilitating debt crisis.
The biggest hit was in raw sugar futures, which dropped more than 4.5 percent during trading on the souring economic environment. London white sugar futures fell 3.5 percent during Wednesday's session.
ICE March raw sugar futures dropped 1.15 cents, or 4.76 percent, to trade at 23.03 cents a lb at 12:30 p.m. EST (1730 GMT), having hit a session low at 22.99 cents.
London's March white sugar futures on Liffe closed down $21.80 at $603.60 a tonne.
"It's a macro sell-off," Alex Oliveira, senior sugar analyst at brokerage Newedge USA, said.
Talk swirled in the sugar market that news that the head sugar trader of Cargill, Jonathan Drake, has left the company may have sparked the selling spree.
"This is all macro. We do not believe it is related to Drake resigning or being let go," a dealer for a major US bank said.
The Price Group senior analyst Jack Scoville said sugar must also contend with the prospect of bumper supplies going forward and slack cash demand. But the macro factor cannot be discounted at this time.
VM Group analyst Gary Mead said expectations of big northern hemisphere crops augured for downside price risk in sugar.
Physical sugar trade has been moderate this week, with soft Thai premiums undercutting Brazilian sugar in Asia, and Indian exports being offered in the market, dealers and brokers said on Wednesday.
COFFEE SINKS, COCOA AT NEW 3-YR LOW
Coffee futures were also sold off hard while cocoa dipped to a fresh 3-year low as bumper supplies from the harvest in West Africa put pressure on bean values.
London's March cocoa futures fell 24 pounds or 1.7 percent to finish at 1,383 pounds a tonne, just barely above the new lifetime low of 1,381 pounds, the lowest level for the benchmark second month since late 2008.
March cocoa on ICE fell $26 to end at $2,142 a tonne, the lowest settlement for the second position contract since late 2008. The contract hit a session low of $2,137.
The benchmark March contract on ICE Futures US has fallen more than 20 percent in the past month. The abundant supply is due mainly to a big harvest in Ivory Coast, the world's No. 1 producer, and in Ghana, the No. 2 grower.
"Industry has a lot of forward coverage on paper and they're just letting the market come to them," said Nick Gentile, head of trading operations in commodity fund Atlantic Capital Advisors in New Jersey
Coffee, along with sugar, was battered by the macro-induced selling spree. "You have some people who bought the market early this morning, and they're looking at the outside markets," said Gentile.
New York's March arabica coffee contract fell 5.95 cents or by 2.5 percent to trade at $2.298 a lb at 12:32 p.m. London's January robusta contract slid $57 to $1,953 a tonne.
Vietnam's 2011/2012 coffee crop would yield up to 1.25 million tonnes, or 20.83 million bags, rising 8.7 percent from the previous harvest, and farmers are expected to end the cherry picking process in January, a senior industry executive said.
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